Airline Shares Fall on New Estimates of Epidemic's Impact

   By Doug Cameron and Alison Sider 
 

U.S. airline shares fell to their lowest level in more than four years as executives said even heavy discounting wouldn't help prevent passengers from avoiding travel because of coronavirus-driven fears.

Industry revenues in North America could fall as much as 10% this year, though that's only half the drop facing airlines world-wide as the International Air Transport Association warned sales could drop by more than $110 billion.

U.S, carriers remain among the most profitable in the industry, and so far have stopped short from pulling their financial guidance for 2020, while acknowledging a big drop in bookings.

Southwest Airlines Co. on Thursday said its first-quarter revenues could be cut by up to $300 million, and like low-cost peers Spirit Airlines Co. and Allegiant Travel Co. said the slowdown affected their business and leisure traffic.

United Airlines Holdings Inc. this week said it would cut domestic capacity by 10% in April, and is parking some jets after cancelling flights to Asia and Europe. JetBlue Airways Corp. has also trimmed flying.

Southwest Chief Executive Gary Kelly said at an industry conference that discounting fares wouldn't help boost demand as passengers simply didn't want to fly.

"The industry can't sustain the current level of seats with the current level of demand," he said in an interview.

IATA, the trade group, said bookings for April had dropped more than 70% in China and Italy, and by about 50% in South Korea and Iran, the four worst-hit countries. In the U.S., analysts estimate the drop is between 10% and 20%.

"It's clear it will be a sizable shock," IATA Chief Economist Brian Pearce told reporters.

The NYSE Arca Airline Index dropped another 9% on Thursday, with Spirit worst hit with a fall of almost 18%. American Airlines Group Inc. shed 12%.

Southwest was the best performer, losing around 3% as the carrier said it wasn't at the stage of having to park planes.

(END) Dow Jones Newswires

March 05, 2020 16:09 ET (21:09 GMT)

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